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Credit Card Application Index — The fastest way to choose a card that fits you

This article is mainly about how to choose a credit card to keep for the long term.

Once you understand why you want a credit card, the most direct question becomes: which credit card should I apply for and keep long term? To answer that, first ask yourself these three questions:

  • What are my usual spending habits?
  • What do I want to get from a credit card?
  • What is my credit background?

The first two questions determine the general range of cards that fit you, while the third determines whether, among those suitable cards, you can get the very best card or just a more basic beginner card. Because everyone’s spending habits and goals are different, the possible combinations get complicated quickly. At the same time, very few cards cover every spending category and every type of reward. If you rank cards based on your main spending categories (the ones that make up a large share of your total spending) and your main goals (for example, redeeming flights between China and the U.S.), you can usually figure out which card you need. Let’s take a closer look below.

blank credit cards in jeans pocket

What are my usual spending habits? (Annual fee vs. no annual fee)

Spending habits really include two things: spending categories (such as groceries, department stores, electronics, and gas) and spending amount (how much you spend in each category every month). Once you know your categories, it becomes obvious that you should pick cards that offer cash back or rewards in those categories. Your spending amount then determines whether it makes sense to choose a card with an annual fee that gives better rewards in those categories. For example:

  • Person A: Groceries $200/month, department store shopping $100, dining out $50, gas $50 (choose a no-annual-fee card that offers cash back on groceries and department stores, such as AMEX Blue Cash Everyday)
  • Person B: Groceries $800/month, department store shopping $100, dining out $100, gas $100 (choose a card with an annual fee that offers better rewards on groceries, department stores, and gas, such as AMEX Everyday Preferred)

What do I want from a credit card? (Cash back vs. points)

A credit card often provides value in several different ways. Broadly speaking, they fall into these three categories:

  • Cash back: earn 1%-5% cash back on spending
  • Points: earn points on spending that can be redeemed for flights, hotels, and more
  • Perks: priority boarding, roadside assistance, hotel room upgrades, and VIP lounges

The choice between cash back and points depends on whether you have travel needs or a real need for round-trip flights between China and the U.S., and whether you are willing to learn how to maximize points (the blog will cover those strategies in future posts). Of course, the advantage of cash back is that it is simple and easy to understand, while the advantage of points is that your return can be much higher. On top of that, extra card benefits can also be a nice bonus.

What is my credit background?

Your credit background determines your credit card application strategy. Beginners should obviously choose a card that is easier to get approved for and still offers solid value, while experienced users have more options and can choose cards with better rewards. Take these two examples:

  • Person A: Just got an SSN and has a short credit history. (Could apply for Discover it; it offers great value and works well as a first card.)
  • Person B: Has a 2-year credit history and 4 credit cards. (Could apply for AMEX EveryDay Preferred; it covers everyday spending and can help redeem free flights.)

Putting it all together

Here the blogger can only give some broad explanations. Everyone’s situation is different, so the analysis needs to be personalized. Below are a few simple examples:

Person A: Student, works as a Research Assistant at school, monthly income 1000, no car, single.

  • Spending habits: Mostly buys groceries and cooks at home ($300/month), travels with classmates about 3 times a year during breaks or goes back home, and mainly shops online for big-ticket items.
  • Wants: Cash back (thinks points are too much trouble)
  • Credit background: 6 months of credit history, 1 card, average score 680

Analysis:

  • Lower spending + short credit history + wants cash back = no-annual-fee cash-back card

Recommended cards:

Person B: Student, works as a Research Assistant at school, monthly income 1500, has a car, has a girlfriend.

  • Spending habits: Mostly buys groceries and cooks at home ($500/month), takes 5 domestic U.S. trips and 2 trips back home each year during breaks, and spends mainly on online shopping and department stores.
  • Wants: Free flights, free hotel stays
  • Credit background: 1 year of credit history, 3 cards, average score 700

Analysis:

  • Medium spending + lots of grocery spending + needs travel = a grocery-focused bonus points card + points that can be redeemed for flights and hotels
  • Good credit background + needs travel = can apply for cards with better rewards

Recommended cards:

Person C: Working professional, monthly income 8000, has a car, has a family.

  • Spending habits: Mostly buys groceries and cooks at home ($1,000/month), travels for work ($1,000/month), and needs to pay children’s tuition plus utilities and miscellaneous bills ($1,000/month).
  • Wants: Free flights, free hotel stays
  • Credit background: 2 years of credit history, 4 cards, average score 740

Analysis:

  • Heavy grocery spending + needs travel = grocery bonus points card
  • Heavy airfare spending + needs travel = airfare bonus points card
  • Heavy spending in other categories + needs travel = bonus points card for other categories
  • Good credit background + needs travel = can apply for cards with better rewards

Recommended cards:

  • AMEX Everyday Preferred (Click here for details): 4.5X on groceries, 3X on gas, 1.5X on everything else; transferring points for flights can be very powerful.
  • AMEX Premier Rewards Gold( Click here for details ): 3X on airfare, 2X on dining
  • AMEX Starwood Preferred Guest( Click here for details ): 2X at SPG hotels; the points are flexible and valuable.
  • Chase Freedom (Click here for details): rotating 5X points categories including online shopping, gas, dining, and department stores

Quick summary:

Careful readers may notice the following:

  • A lot of the recommended cards are AMEX cards: the annual fee can be offset by AMEX OFFERs and sometimes even come out ahead, the purchase protection/extended warranty is strong, customer service is excellent, and MR points are very valuable (details here)
  • Some no-annual-fee cards are also excellent: cards you can keep long term can help build your credit score, so if you can keep them, do so (details here)